The S&P 500 broke its much-watched 200 day moving average on Friday, which left many a portfolio manager, like Roger Nusbaum, considering defensive hedges at week’s end. In this weekend’s Barron’s, Michael Santoli takes a contrarian position, arguing the market’s now “overprepared for the next storm.” The heart of Santoli’s argument:
With the Dow at 12,118, and the Standard & Poor’s 500 at 1278—just about where they were sitting one year ago—the burden of proof falls upon those who have been suggesting, here and elsewhere, that 2012 need not hew so closely to the 2011 macro-panic-and-policy-rescue script.
The case for avoiding last year’s fate, or worse, rests on somewhat larger fundamental cushions—and on the simple observation that traumas so fresh in mind don’t usually allow for a hazardous complacency to rebuild so quickly. Corporate earnings, total employment, retail sales, housing activity and bank lending are all significantly higher than they were a year ago, while stock-market valuations at this year’s market peak were less lofty than at the first-quarter 2011 peak. Further, there is now a new European Central Bank chairman who has shown more willingness to marshal monetary powers to head off banking collapse.
Santoli even goes so far as to name some high-volatility cyclical stocks that he thinks could rally sharply if the market gets some unexpected good news. But for some reason, Barron’s didn’t choose to put Santoli’s bold bullish call on its cover. That honor, while all eyes remain on the macro picture, went to none other than… wait for it… Ugg’s.
